Grocery tax cuts compete for support in Tennessee legislature
Paper plates decorated and labeled "no grocery tax" adorn the office door of Nashville Democratic Rep. Aftyn Behn, sponsor of a bill to end Tennessee's grocery tax. The bill was effectively shelved for the year. (Photo: John Partipilo/Tennessee Lookout)
A House finance subcommittee declined to pass — but didn't kill — a Democrat-sponsored grocery tax reduction bill Wednesday, possibly paving the way for a Republican-backed bill to cut or reduce the state's 4% sales tax on groceries.
The panel added a funding mechanism to House Bill 2, sponsored by Democratic Rep. Aftyn Behn of Nashville, then shipped it to what is known as 'summer study,' ending hopes of passage this year but enabling hearings on the plan before 2026.
'The tone has shifted on this issue because we made it a campaign issue last year,' Behn said.
Behn's goal is to build 'consensus and narrative' statewide, continue to push the measure during the gubernatorial campaign and revive it in 2027.
Meanwhile, Republican Rep. Elaine Davis of Knoxville said Wednesday she's ready to start moving her measure through House committees over the next two weeks.
The biggest difference between the two is that Behn's bill calls for replacing lost state revenue of $600 million by closing 'loopholes' in the state's corporate minimum tax, which levies a 3% tax on companies generating more than $100 million of revenue, and enforcing 'worldwide combined reporting,' an accounting method states can require multinational corporations to use when calculating taxes owed on profits.
The Department of Revenue reported last year that 60% of companies are paying $100 or less on the excise tax and 21% of companies with more than $1 billion in federal taxable income are paying nothing on the excise tax. Behn and Democratic Sen. Charlane Oliver of Nashville solicited the report.
Democrat Bryan Goldberg, who ran against Davis in the 2024 House contest, put out ads saying he would end the state's food tax.
Davis came out with her proposal late last year and renewed the push recently with Republican Sen. Bo Watson of Hixson carrying the Senate version. House Majority Leader William Lamberth is co-sponsoring the bill.
It contains no method for replacing lost state revenue, which could hit the $843 million mark.
Watson told the Tennessee Lookout the legislature would need to come up with spending reductions to pay for the grocery tax cut.
Davis admits her bill could lead to a major revenue reduction, an estimated $800 million, yet she describes it as a 'true tax cut' because it doesn't raise taxes elsewhere. The measure would affect only the state's share of sales taxes, not local revenue.
Davis added, 'It's really not decreasing revenue because … those families, those dollars they're going to use in the grocery store to buy other products as well or they're going to use them to take their family out to dinner.'
Short of eliminating the state share, Davis said other options could involve breaks on basic items such as bread, milk, eggs, fruit and vegetables, then phasing in small cuts incrementally.
Behn is skeptical of the Republican proposal, saying the legislature doesn't have any way to pay for it because the state is 'broke' after lawmakers enacted a massive business tax break in 2024.
'If they're going to take $600 million from (Department of Children's Services) or TennCare, I would love for them to explain it on the House floor,' Behn said.
Republicans have said they oppose her bill because it could force companies to cut jobs. Behn, though, said the state could pay for her proposal by enforcing the tax code 'as it's written.'
Her proposal has been enacted in 20 other states, including Texas and Idaho, which Behn pointed out are not 'liberal bastions.'
Further, Behn said President Donald Trump is encouraging cuts in food taxes and added she would be glad to support a 'Trump-Lamberth' grocery tax break.
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